Debt-Choked Puerto Rico at Fiscal Brink as Bond
Buyers Pull Back - (www.bloomberg.com) The
sobering news arrived in San Juan via telephone from Washington. It was April
28, and U.S. Treasury Secretary Jacob J. Lew called to tell Puerto Rico
officials they must confront one of the island’s gravest financial crises
without a bailout. Saddled with $72 billion in debt, the commonwealth -- a U.S.
territory since the Spanish-American War -- needs a “credible” plan, Lew said. The
Caribbean island is hurtling toward the fiscal brink. After years of borrowing
to paper over deficits, and with $630 million due
to investors on July 1, Puerto Rico may confront the unthinkable: a default.
The prospect has set Wall Street on edge as bond yields surpass those of
Argentina and Greece; about half of municipal mutual funds hold commonwealth
debt. Puerto Ricans across the political spectrum are alarmed at the scale of
the crisis, Rafael “Tatito” Hernandez, chair of the House Treasury Committee,
said during a May 6 interview at the Capitol. Every mayor on the island will
face angry constituents, he added, especially those whose work weeks may be cut
to four days.
Facing Low Returns and Balky Investors, More
Hedge Funds Close Doors - (www.nytimes.com) For
decades, nearly everything that the billionaire Julian
Robertson touched
turned to gold. Mr. Robertson, founder of the hedge fund Tiger Management,
seeded a network of hugely successful “Tiger Cubs” — companies that in turn
seeded more talent. It became the closest thing the hedge fund industry had to
a dynasty. Since the start of this year, however, the managers of three firms
spun out of that gilded empire have called it quits after volatile performances
and sometimes steep losses. They will return money to investors and focus on
managing their own wealth. TigerShark, Tiger Consumer and JAT Capital
Management are just three examples among a recent wave of hedge funds that have
closed their doors to investors in the face of choppy markets. They are a
reminder that the hedge fund industry is not all spectacular returns. In past
years, titans like George Soros and Stanley F. Druckenmiller have also taken
down their shingles, choosing to manage their own enormous wealth without the
worry of pesky investors.
[Bloomberg] Bond-Market Crash Has Wall
Street Banks Divided on What’s Next - (www.bloomberg.com) Maybe,
just maybe, this whole bond rout is ending. The global selloff that’s set
investors on edge finally slowed last week, and some analysts are saying the
worst is over. Treasuries look fairly valued given the outlook for inflation
and interest rates, according to Bank of America Corp. -- although with plenty
of caveats. In Germany, options traders convinced a bund-market crash was all
but inevitable less than two weeks ago have scaled back most of those bets. Goldman
Sachs Group Inc. warns that government debt is still expensive, but a growing
number of investors are finding value after the four-week exodus sent yields
soaring. Prudential Financial Inc.’s Robert Tipp is buying because tepid U.S.
growth will keep the Federal Reserve on hold, while Europe remains too weak to
sustain higher yields. And don’t forget about central banks in Europe and
Japan, which are buying billions of dollars in bonds each month.
Peak
Of Bakken Oil Production Signals Collapse Of U.S. Economy? - (www.srsroccoreport.com) The U.S. is in serious trouble. The great
U.S. Bakken oil field supposedly responsible for making the United States
energy independent, is now showing signs of peaking. Not only has oil
production from the Bakken declined significantly, so has the Eagle Ford.
If these two shale oil fields have indeed peaked, the collapse of the U.S.
economy will certainly follow. According to the U.S. Energy Information Agency
(EIA) May 2015 Drilling Productivity Report, shale oil production from these
two fields is forecasted to decline 78,000 barrels per day (bd) in June.
If we go by data from the EIA Drilling Productivity Reports, the Bakken peaked
in March at 1.328 million barrels per day (mbd) and the Eagle Ford at 1.733 mbd.
If we look at these two charts (especially the Eagle Ford), we can clearly see
the current peak and decline is more severe than any small down trends in the
past. Furthermore, this just may be the beginning of a much steeper
decline to come later in the year.
Screeching
U-turns on bonds and greenbacks - (www.ft.com) Screeching
U-turns are under way in hedge funds and economic forecasting departments
across Europe and the US. The biggest bet in the world has gone into reverse,
and a lot of money has gone with it. The plummeting value of
bonds,
and so soaring yields, has seen drastic moves in German Bunds in the past
month, while the belief in a strong dollar has been battered as the euro leapt.
To answer the question of where things go next, investors must decide what
happened. There are two broad explanations: fundamentals or excessive
positioning. There is no doubt that the economic outlook changed. At the start
of the year (almost) everyone was convinced that the US was growing rapidly,
and the eurozone stagnating. No one predicted Europe would beat the US in the
first quarter. At the same time, panic
over deflation subsided as oil rebounded. Investors piled back into
inflation-linked bonds as they began to sniff price pressures, leading to rapid
rises in market-implied estimates of future inflation.
Greece Remains Defiant as It Seeks Deal With Creditors This Week - (www.bloomberg.com)
Tech Froth has Some Investors Talking Bubble - (www.usatoday.com)
German economy minister says Greece can only get more aid if it reforms - (www.reuters.com)
[Morgenson] Shareholders’ Votes Have Done Little to Curb Lavish Executive Pay - (www.nytimes.com)
Drought cuts power production of California dams - (www.latimes.com)
China Calls On Banks to Support State Projects as Economy Slows - (www.bloomberg.com)
Iran’s Yemen Aid Ship Enters Gulf of Aden, Defying Saudi Navy - (www.bloomberg.com)
Neither China nor US giving ground over projects dispute - (news.yahoo.com)
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